6 First-Time Home Buyer Myths

Buying your first home can be an intimidating process, as there are many steps involved before you can move in and begin this new chapter of your life. From determining a budget and applying for a mortgage to hiring a real estate agent and making an offer, the experience will take time and require patience, organization and research. There are also some common misconceptions about purchasing a home that buyers should be aware of, especially those who’ve never been through the process before.

Here are six first-time home buyer myths, along with the facts debunking them:

#1: You should find a home to buy before applying for a loan. (False)

Motivated sellers aren’t going to sit around and wait for a buyer to obtain a mortgage loan. Instead, they’re going to accept the best offer. For example, if a buyer makes a healthy offer on a home, but he or she hasn’t applied for a mortgage loan, the seller will likely be less inclined to agree to such a deal. This is because getting approved for a loan takes time, and the buyer may not receive enough funds to pay top dollar for the property. Consequently, it’s important for buyers to at least get pre-approved for a mortgage loan with a reputable mortgage lender before starting their search. This way, they’ll be prepared to put their best foot forward when they find the right property and prove to be a serious buyer to sellers.

#2: There is only one type of loan you can apply for. (False)

Some first-time home buyers may not realize there are several types of home loans available. While they may not qualify for all, they’ll likely have more than one option. Besides the conventional mortgage loan, there are also Federal Housing Administration (FHA) loans, U.S. Department of Veterans Affairs (VA) loans, U.S. Department of Agriculture (USDA) loans, and the Fannie Mae HomeReady® Mortgage, among others. The key to determining which financing option is the best for you is contacting a lender who can explain what each loan entails, as well as the requirements and information needed to apply.

#3: You need to pay a minimum of 20 percent down. (False)

Twenty percent of a property’s purchase price is the standard down payment. However, it’s not the only option. Depending on the type of loan obtained, the minimum down payment requirement will vary.

Take FHA loans, for instance. These tend to have more flexible qualifications compared to other mortgages. As stated by the U.S. Department of Federal Housing and Development (HUD) on its official website: “Your down payment can be as low as 3.5% of the purchase price” with an FHA loan. Factors, such as credit score, will play a role in determining what someone’s down payment requirements will ultimately be. Still, this could help buyers save a significant amount of money.

Real estate agents can lend a helping hand when it comes to choosing a lender, as well, since they’ve likely worked with different lending companies and mortgage loan originators. Therefore, they may be able to shed some light on which lender tends to provide the fairest rates and best customer service.

#5: The only thing you have to worry about is making the down payment. (False)

Being able to afford the required down payment for a new home is obviously an important factor for a prospective homeowner. There are other costs involved in the purchase that first-time home buyers may not be aware of, however. Buyers are often expected to pay closing and moving costs, as well as (if applicable) appraisal costs, homeowner’s insurance, title insurance, and private mortgage insurance, among others.

#6: All mortgage lenders offer the same loans. (False)

Not all lenders provide the same loans. Take FHA loans, again, as an example. Only FHA-approved lending companies can offer these. That means anyone interested in securing a FHA 203(k) loan, for example—a loan providing funds to purchase and renovate a home—would need to obtain approval from such a lender. Besides asking a real estate agent, borrowers can locate these via a search tool on HUD’s official website, as the FHA is a part of this government department.

Contour Mortgage provides borrowers various types of mortgage loans in New York, New Jersey, Maryland, South Carolina, California, and several other states. Contact us today to find out how we can help you purchase your first home.

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This website and all its contents is an advertisement from Contour Mortgage Corporation, not FHA or HUD. This content has not been approved by the Department or Government Agency Licensed Mortgage Banker – New York State Dept of Financial Services. Contour Mortgage Corporation - Equal Opportunity Lender - NMLS # 34384